Fitch: Faurecia's Automotive Exteriors Disposal Positive for Credit Profile
OREANDA-NEWS. Fitch Ratings says that Faurecia S.A.'s disposal of about 95% of its Faurecia Automotive Exteriors (FAE) business is positive for the group's credit profile. However, it will not have an immediate impact on the company's 'BB-' Long-term Issuer Default Rating and Stable Outlook.
With an enterprise value of EUR665m, the FAE sale will decrease Faurecia's indebtedness and be marginally positive for operating margins. FAE is the group's least profitable division. Combined with the early redemption of its EUR250m convertible bond, Faurecia's total financial debt will fall by EUR0.9bn in 2016. On a proforma basis, we project that funds from operations (FFO) adjusted net leverage will decline to 1.2x at end-2016 (instead of 1.6x excluding the FAE disposal) from more than 2x at end-2015 and 3.1x at end-2014.
We also expect the disposal to free up financial resources that could be reinvested in capital expenditures or business acquisitions in faster-growing and more profitable businesses. In particular, the company's CEO made comments recently about a potential development of the interior business, notably around connected car technologies.
Fitch expects to discuss Faurecia's strategic prospects with management in the near future to review the impact of this disposal on the group's rating. In particular, we expect to assess Faurecia's plans regarding potential future acquisitions and strategic realignment, indebtedness and leverage targets and free cash flow generation, which remains a weakness for the rating.
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